Recovery of the Housing Market will come Quickly

teabelly

No one knows what will happen. Transaction numbers fell off a cliff so it is entirely possible the market could pick up as fast as it fell over. The spring quarter is usually what sets the tone for the rest of the year. If spring 2009 starts to show increased transaction levels and recovery then it will be sooner rather than later that the market gets back to being more normal. Not up to the heady days of madness but a more subdued level of sensible transactions at sensible prices. People still want to buy, banks don't want to lend and the media are running around screaming crash or green shoots on alternate days so anyone that takes any notice of what they are saying will be bemused.

The money that the banks were lending didn't exist. The losses they have made are just numbers on the screen as they have just been creating money out of thin air. Governments print currency when they want more cash to waste so banks have just done the same.

Risk management assumes you can quantify risk properly and accurately anyway. History is littered with people that went bust when the impossible once in a million year disaster happened and wiped them out.

Conrad

As indicated in my thread about B2L in central Colchester, I think the recovery may be rapid.

Following our visit to Colchester this weekend my freind found a brand new house for under £100k (1 of only 4 on the development) with a rent yield over 8%.

Sooner or later people will flock to these yields. If prices go a bit lower - nothing really to get upset by, but by waiting for clear recovery signs it will be too late to get bargains like this. The seller has it in thier head that prices will keep dropping hence the reduction from £145k last summer.

As I keep pointing out, the worlds richest investor Warren Buffett urges people not to try and spot the bottom as it's an impossibility and those waiting for clear signs by definition will miss the bottom.

Unfortunatley my cash is put aside for a foriegn property I am due to complete on, otherwise I would defo buy now and expect £50k capital growth in the next 24 months on a property costing £90 - £100k now.

Conrad

Don't get too carried away by bad news, as history reveals the generally pessimistic crowd misread the picture, and I admit to being a bit of a pessimist, but I recognise it is really a fairly illogical state of mind.

To demonstrate this, consider the following;

EVERY generation tends to think society is going down the pan. I don't mean just recently, take a look at newspapers / publications going back hundreds of years and sure enough in EVERY generation the doomsayers assure us we've had it, whether it's the youth of today, drinking culture, educational standards, the enviroment or the economy.

Now when you confront a doomsayer about this they will disreguard all that evidence and and say this time it really will come to pass as they are REALISTS, not pessimists. Once again a trawl back through history will show the doomsayers always make the claim they are merely realists in possesion of the facts.

Look up pessimism on Wikipedia. It essentially says pessimists always consider the world around them to be about the worst possible world, whereas optimists tend to think the world is about as good as it can be.

There is always a tendancy to overdo the down side by the gloom camp. They were CERTAIN UK plc had had it in the 1960s, 70 and 80s thanks to the rise of the east, and guess what they're still saying now, despite it not having come to pass previously!

What pessmists seem to lack is an understanding of human nature, in so far as the human spirit does in the end overcome.
Even through the 1930s masses of homes were built (take a look at the fields of 1930s houses right accross London), so despite immensely diffciult times, still LIFE WENT ON.

If after WW2, big homes were built and life went on, eveything didn't collapse into oblivion, Bank's did not all lie down and give up.

In other words, be careful when it comes to reaching for the dark side - you will almost certainly be wrong most of the time

neverdespairgirl

Conrad wrote: »

Look up pessimism on Wikipedia. It essentially says pessimists always consider the world around them to be about the worst possible world, whereas optimists tend to think the world is about as good as it can be.

Optimists think we live in the best possible world...

pessmists know we do!

WTF?_2

There's no need to spot the absolute bottom if you are just looking for a place to live in at a sensible price.

Either buy when it becomes affordable or if you must get maximum value, better to wait until there is a clear trend of recovery and pay a couple of percent over the lowest price as you'll still be paying 25% less than the peak.

This is all academic anyway, we're not even properly into the overall crash yet despite the existing ~10% drops from peak. It's still 'phoney war' stage in the markets. Unless of course you buy into the last straw argument that the bulls are now all clutching at: That this is all down to the lack of 'silly money' mortgage offers and when these come back as they surely will, the market will bounce right back :rolleyes:

Anyone pedalling this tripe should take a look at when the mortgages started to dry up vs when the market turned from years of MoM postive to an ongoing trend of MoM negative. Hint: The market started to decline about 4 months before mortgage credit dried up.

EDIT: Of course credit didn't actually dry up - just the giveaway no questions asked, no deposit needed credit that was fuelling the high prices. 'Traditional' mortgage loans are still available at historically good rates .. yet prices are still dropping fast.

Max_Headroom_3

teabelly wrote: »

No one knows what will happen. Transaction numbers fell off a cliff so it is entirely possible the market could pick up as fast as it fell over.

But pick up at what level? The prices of last year were underpinned by stupid lending (huge BTL portfolios all financed, self cert, huge salary multiples and on and on).

That's all gone now, so before things can "pick up" prices need to find a level that the money that is now available will support.

And things can't "pick up" until it reaches that level.

Conrad

!!!!!!, those B2Ls Im talking about in Colchester were selling for abouve £140k last summer and can now be had from desperate sellers at £90 - £100k, so thats a lot more than 10% off.

Max_Headroom_3

Dithering_Dad wrote: »

Pessimists just go onto the MSE Housing forum and talk nonsense.

Funny, I never had you down as a pessimist DD...

Dithering_Dad

Max_Headroom wrote: »

Funny, I never had you down as a pessimist DD...

Nah, I'm a masochist.

WTF?_2

Conrad wrote: »

!!!!!!, those B2Ls Im talking about in Colchester were selling for abouve £140k last summer and can now be had from desperate sellers at £90 - £100k, so thats a lot more than 10% off.

Yeah - there are some places that have had 50% falls already (mostly BTL-fodder executive apartments).

But the market can't move until prices are generally at a level that buyers can/will meet. Right now the banks are lending sensibly, so there's no hope of seeing nonsensical prices anytime soon.

That's why some desperate VIs are suggesting that the taxpayer underwrite mortgages - enabling the banks to lend stupidly again with the taxpayer picking up the liability.

But absent some sort of preposterous scheme like that, there's no way that the credit taps are going to be flowing as they were during the bubble any time soon.

And with public sentiment turning towards "prices are going down and we're heading for bad times" there's certainly not much chance that people will now queue up to take on 150k of debt to buy an FTB shoebox.